November is upon us which typically means A LOT of rain here in Vancouver Canada. We have had a few rainfall warnings already (like +80 mm per day) and looks like there are a lot more raining days ahead. I do love raining days though because it means snow up in the mountains! Hopefully Mrs. T and I will be able to head to the slopes for a few times this skiing season! Who wants to babysit and look after Baby T1.0 and T2.0 for us?
In October we received dividend income from the following companies:
Pure Industrial REIT (AAR.UN)
Bank of Nova Scotia (BNS.TO)
Corus Entertainment (CJR.B)
Canadian Natuaral Resources (CNQ.TO)
Dream Office REIT (D.UN)
Dream Global REIT (DRG.UN)
Dream Industrial REIT (DIR.UN)
General Electric (GE)
H&R REIT (HR.UN)
Inter Pipeline (IPL.TO)
KEG Income Trust (KEG.UN)
Prairiesky Royalty (PSK.TO)
RioCan REIT (REI.UN)
TranCanada Corp (TRP.TO)
Domtar Corp (UFS.TO)
In total we received $1,083.47 in dividend income in October 2016 from 22 different companies. We received a total of $93.65 in US currency and the rest, $989.82, was in CAN currency. I was slightly surprised that we received less than $100 in US dividend income this month. It was a Canadian-dividend-heavy-kind-of month. Not as much currency diversification as I wished for but still solid dividend income nonetheless. Please note, we use a 1 to 1 currency rate approach, so we do not convert the dividends received in US dollar into Canadian currency. Reason for doing this is to keep the math simple and avoid fluctuations in dividend income over time due to changes in the exchange rate.
The top 5 payouts came from Bank of Nova Scotia, Coca-Cola, TD, Telus, and CIBC. The top 5 payouts correspond to about 53% of our October dividend income. This is definitely different from the very well diversified top 5 payout exposure that we saw in September.
Compared to October 2015, we saw a 14.4% YOY increase. Certainly not one of the best YOY performance months but still quite respectable growth considering we received almost $950 in dividend income last October.
Here’s a very important thing to keep in mind… As we start getting more and more dividend income each month, it becomes harder and harder to see a significant YOY increase. Why? Imagine receiving only $20 per month in dividend income, or $240 for the year. A 100% YOY increase means the annual dividend income will increase to $480, or $40 per month. At 3% dividend yield, only $8,000 additional capital is needed to see 100% YOY increase.
Now imagine a monthly dividend income of $1,000, or $12,000 for the year.
A 5% YOY increase means an additional $20,000 is needed at 3% dividend yield.
A 10% YOY increase means an additional $40,000 is needed at 3% dividend yield.
A 20% YOY increase means an additional $80,000 is needed at 3% dividend yield.
A 50% YOY increase means an additional $200,000 is needed at 3% dividend yield.
As you can see, it takes significant large sum of fresh capital to sustain a high dividend growth rate. Unless you are making millions at your job, it is challenging to save $200,000 each year.
Our YOY average dropped from 24.17% last month to 23.19% this month. A drop of almost 1%. It will be interesting to see whether we can hold the YOY average at 23% with two more months to go for 2016.
I think it’s pretty cool to take a closer look at the graph below and see how much progress we have made since 2011. There has been significant amount of dividend growth over the years. It’s really neat to see the bars getting longer and longer each year. Again as per my statement above, we probably will start seeing these bars growing at a slower pace starting next year.
In October a number of companies that we own in our dividend portfolio announced dividend increases:
- Omega Healthcare increased dividend by 1.67% to $0.61 per share.
- Visa increased dividend by 17.86% to $0.165 per share.
- AT&T increased dividend by 2.08% to $0.49 per share.
- Chevron increased dividend by 0.93% to $1.08 per share.
- Telus increased dividend by 4% to $0.48 per share.
- McDonald’s increased dividend by 5.6% to $0.94 per share
- Canadian Natural Resources increased dividend by 9% to $0.25 per share
- Inter Pipeline increased dividend by 3.8% to $0.135 per share.
In total our forward dividend increased by $63.50. While it might sound like a small amount, if we use a 3% dividend yield, that means we didn’t have to invest $2,116.67!
It was great seeing all these dividend increases but I was slightly concerned seeing dividend increase from CVX, CNQ, and IPL. Why? Because all these companies have seen their revenues drop due to the lower crude oil price. We will have to keep a close eye on the respective payout ratio to make sure the dividend payouts are sustainable.
Conclusion & Moving Forward
So far in 2016 we have received $10,296.78 in dividend income. I am extremely happy to see that we have crossed the $10,000 milestone! I can’t wait to see how much dividend income we end up with by end of 2016. Life is good!
Dear readers, how was your October dividend income?